On March 21, all PSUV battalions met to discuss the document, together with an article written by Venezuela’s President Hugo Chavez (read it HERE). The day after, Chavez announced his government’s anti-crisis measures (see http://www.venezuelanalysis.com/analysis/4314).

The
citizens of the world are witnesses to the new crisis in the capitalist mode of
production, universal in scale. No one doubts that what we have, in its origin
and foreseeable development, is a complex and deep crisis that for sure, by
generating structural changes and re-accommodation of productive forces, will
allow for the opening up of a new historic stage of human civilisation.

During a
fraternal discussion with compatriot Alberto Müller, he warned of the danger of
what he called “economistic bias” in analysing the world crisis. Undoubtedly,
this crisis, more than economic, was already a historic one in the sense that
it questions the paradigm of modernity that sustains capital accumulation and
the reproduction of the system through the most grotesque financial speculation,
explained by state deregulation, dominant under the neoliberal format; the
accelerated deterioration of the world environment, particularly through climate
change; the starvation of millions of human beings in Asia and Africa, not
because of “scarcity” of food but rather the lack of opportunity to access it;
the insecurity generated by an energy model that concentrates its use for the
wellbeing of a minority of the population of the planet; the disproportionate,
wasteful and inhumane spending on weapons of mass destructive that feed local
wars, consumerism sustained on credit, the deepening of the
scientific-technological gap in favour of the inhabitants of the developed
countries, among others.

The
inherent contradictions of capitalism – a system based on production for profit
and not needs – remain, with the economic cycle of boom and crisis over the
last two decades, masking the unprecedented funding of the system through the
massive use of credit. In fact, since the decade of the 1980s, the
growth rate of financial capital was greater than that of the real economy
(industry, agriculture, agro-industry).

The financial “bubble” originated out
of the most unusual speculation with the value of goods, that is, the housing
market, led the US into a devastating financial crisis
that, in one foul swoop, wiped out the investment banking sector, provoking an
enormous destruction of capital on the world scale, first, in finance, and
afterward in manufacturing.

From this
we can extract our first major conclusion: the capitalist crisis of the 21st
century is a crack in the accumulation of its global financial sphere.
That is why we are marching towards another economic depression that is much
deeper, graver and longer than that of the 1930s.

Deep down, and with
the rigor of historic time we have lived through, we are in a crisis of the model
of capitalist neoliberal monetary accumulation, dominant since the decade of
the 1980s,
when, under Margaret Thatcher and Ronald Reagan, rejection of state
intervention or regulation mechanisms became hegemonic in the sphere of
economic policy.

Capitalism, and only
capitalism, is responsible for the crisis. Its internal contradictions that
aim to centralise and concentrate capital, to sustain a historic tendency that
leads towards over-accumulation (excess of capital), to produce what Karl Marx
called “the conflict between the expansion of production and valorisation”, as
well as the insufficiency of workers’ purchasing power that generates underconsumption
in the midst of wealth generation, are the scientific explanations of cyclical
capitalist crises. Therefore, what is occurring today with global capitalism is not the
responsibility of the workers of the world, nor of the oil-producing countries,
nor the so-called Third World countries. There is no such thing as capitalism without
crisis. Capitalism is responsible for the current crisis.

Unfortunately,
we will have to live with a global recession for at least three years. We are not
confronting a brief temporary pause in the process of economic development,
this could be the most important crisis of the capitalist model of exploitation
since its genesis. We cannot be indifferent to the global economic crisis,
because it dominates everything. The “collapse” of consumption and investment
in the US, Europe and Japan, will impact on their energy needs,
which is the umbilical cord of the Venezuelan economy.

The destiny of our
revolution, its persistence, measured by the satisfaction of needs that raise
the wellbeing of our families, is inexorably tied to the responses we offer to the problems
posed by the capitalist economic crisis.

And the
responses will be conditioned by an understanding of its dimensions and its
demands. There is abundant historic experience to demonstrate that the loss of
material wellbeing due to a capitalist crisis has only one result: social
unrest, protests, strikes. Venezuelan socialist militants have an obligation to
deepen our capacity to comprehend, explain and foresee the unfolding of the
world economic crisis and its impact on our country, and play a vanguard role
in the ideological struggle, in the social and class battles, something that is
demanded of us in order to persist in our project for a socialist society that
is egalitarian,
libertarian and just, and capable, at the material level, of resolving, of attending
to basic human needs necessary for a life filled with greatness and wisdom.

II. The character of the financial
crisis in the US

Economic policy in the US and financial accumulation

In 1988,
economics Nobel Prize winner Maurice Allais warned in time that the US economy
“seems to have been abandoned to a sort of financial speculative delirium,
where enormous profits appear without any real foundation, whose demoralising
effect are truly underestimated” (Capitalism
Against Capitalism, p.69). This appreciation corresponded with the
dominance of neoliberal thought in the sphere of world economic policy, whose
principal expression was the conservative current headed by [then-British Prime
Minister] Margaret Thatcher and [then-US President] Ronald Reagan, who were against
state intervention.

US economic policy favoured capital
accumulation in the financial sphere over the last three decades.

Its sustenance was the total absence of rules, short-term profits and the preponderance
of the virtual economy over the real economy (industry). The US financial
system multiplied to 3.3 times from what it was after the post-war period.
Before the current world crisis exploded, “finance” represented 30% of the profits
of capitalist corporations.

A state
that turned its back on regulation of financial markets permitted the emergence
of a highly speculative financial capitalism, concentrating the process of
capital accumulation in the financial sphere, given that they were guaranteed,
on the one hand, US growth
based on credit-based consumption, and on the other, the obtaining of
“immediate profits”.

The finance `industry’ and the
housing bubble

Low interest rates fuelled
indebtedness, consumption and housing demand by US families. The price of
housing shot up to 70% above the rate of inflation (1996-2006). The growth in
value of these between 1997 and 2007 was 401% in South Africa, 220% in Ireland, 195% in Spain, 174% in Australia, 150% in France and Sweden and 100% in US. To give us an idea
of what this means, let’s look at the following figures: in January 2000, the
average price of a house in the US was US$163,500; by May 2007 it
reached $262,600. In this country, there was a “boom” in housing construction:
in 2002, 1.5 million homes were built. In 2006, this figure reached 2.3
million. A gigantic housing bubble had been born, lifting the value of these
goods far above their real value.

From 1996 to 2006, the bubble created
$8 trillion* in fictitious wealth.

The US banking sector, taking advantage of
this unprecedented expansion of the property market, sought out liquidity by
creating structured financial instruments structured on low-quality credits
(sub-prime) that ended up representing 12.5% of the housing market by 2007.

In this
way, what would become a grave problem dramatically expanded. Over these years
of lack of regulation, capitalism made phenomenally more sophisticated all
products and markets, by turning into
securities (packaging) practically all types of assets and cash flows.

Speculative
capitalism invented its own finance “industry”, capable of “producing” so-called
products or derivatives that were nothing more than paper, complex, diverse,
non-transparent securities, with extremely risky underpinnings.

The banks transformed
high- and low-risk mortgages into products or derivatives called MBSs (mortgage
backed security) and CDOs (collateralised debt obligations). It’s incredible,
but true. They converted 15 million mortgage credits into “securities” (transferable
bonds). When the bubble burst, 10 million of these credits turned bad.

It is worth noting that in 1999, the US Congress
approved allowing companies holding banking shares to convert themselves into
society holdings, which in turn could carry out any financial activity.

In this way, the investment banking sector was
equated with commercial banking sector that since the Great Depression (1933, Glass-Seagall Law) were clearly
separated in regards to their activities and operations. That is how the
gigantic investment bank Lehman Brothers speculated with total US neoliberal legality until abruptly collapsing in
2008.

The New York Stock Exchange (Wall Street) became
overloaded with these complex and deregulated financial instruments that had mortgaged
debt as collateral (type of guarantee) and which, once interest rates began to
rise, made housing mortgages unpayable (insolvency) for millions of families.
At the same time, at the end of 2007, investment banks and other financial
services companies adjusted their accounting books in order to include the loss
of value of securities, unleashing the collapse of share markets and credit
market in the US. The crisis was formally beginning, not long after reached Europe, Japan and Asia and, what is the most delicate aspect of it all,
crossed into the real economy more rapidly than was expected. The neoliberal platform trembled, and the International Monetary Fund
(IMF) submerged itself in silence.

III. State intervention
and recession

Is Keynes the answer?

The surprise disappearance of the totality of the investment banking
sector, more than 10 million bad mortgage credits referred to as “toxic”,
unleashed not only a fall in share prices on Wall Street but also a generalised
panic in the financial system that helps explains the grave contraction in
credit activity in the US and the rest of the world.

As a consequence, we can affirm with historic rigor that the initial de-acceleration
of the US economy in 2008 is directly tied to this contraction of credit that was
the result of the collapse of share markets backed by mortgages. Now no one
wants to lend to anyone, inside or outside the country. Neoliberalism is on the
run and the US state returned to deal with what could be the greatest crisis of the
capitalist productive system.

Both [former US President George W.] Bush and [current US
President Barack] Obama approved what they call rescue and stimulus programs, meaning
a fiscal policy or expansive spending. To date, March 2009, the financial
rescue in the US is of the order of US$2.6 trillion. A truly spectacular figure that
implies the largest intervention and most quantitative transfer of debt in
world history.

The world financial rescue
(2008-2009) reached the astronomical figure of $6.2 trillion*.

Additionally, all the central banks of the developed capitalist
countries have substantially cut interest rates in order to attempt to
counteract the freezing of loans and have made available addition credits with
the intention of maintaining the financial markets functioning. All of this is
the reason why the world of economic science has asked itself if this means a
return to Keynes or neo-Keynesianism. We believe that this question is not the
most transcendental. What is important is to understand where these resources
have been directed towards.

We can affirm that until
now the character of these interventions have been in favour of big capital and
not the affected society.

For example, why haven’t the debts of people or families whose housing
mortgages exceeded their capacity to pay been renegotiated, instead of buying
damaged “toxic” securities from bankers or injecting capital?

What has happened is that the multimillion dollar attempt to “salvage”
the banks of the developed countries has not detained the contraction of the global
credit markets, meaning that the world economy deepens its path towards a
global depression. The truth is that the majority of the large global banks are
completely insolvent despite this multi-million dollar assistance.

In the current conjuncture, a preliminary conclusion can be draw: the
biggest effort ever of fiscal stimulus in capitalist history, the largest
reduction in interest rates and the biggest plan to aid the banking sector in
order for them to resume lending credit to the markets has dramatically failed.
This is the beginning of a vicious universal cycle that is leading us towards
various years of tremors in global capitalism.

Towards the global depression

The economies of the US,
Europe and Japan have been strongly weakened. It is not just due to the insolvent banks
that the recession has reached the real economy in a brutal form. This year the
world will have negative results in growth, something that was unexpected.

World trade will decrease by 6%. The collapse in the accumulation of
finance capital will drag the real economy along with it, without any clemency.
We are at a point where more is being produced than consumed, implying a lowering
of the rate of profit in real production and increases in the rate of
unemployment. There is not a single large capitalist corporation that has not
announced a reduction of investment and therefore of personnel.

This unemployment in the real economy is a
demonstration of the disastrous nature of this world crisis. It has been
conservatively estimated that there are currently 241 million unemployed workers
in the developed world. Overall, 12.5 million of these unemployed are in the US (of which 4.4 million lost their jobs between
December 2007 and February 2009, a rate never before seen in this society) and
17.5 million unemployed are in the European Union. This growth in unemployment
reinforces the similarly dramatic fall in consumption, strengthening the
negative expectations for real investment, which if it continues to fall, will
impact again on employment.

What is grave is that in matters of monetary policy, there is no space
to make cuts in interest rates in order to reanimate credit and, by doing so,
lift the economy by way of consumption and investment. We are faced with a
cycle of large contraction. The worst is yet to come. Remember that the US
economy sustained its growth in the growing indebtedness of families and
companies. The first led to a per person saving rate of zero and, will the fall
in demand for credit, consumption and savings contracts, further sticking the
boot into the economy.

In its most recent report, in March 2009, the World
Bank predicts that industrial production across the planet will be 12% less
than the year before and the Third World financial
needs will be between $270-700 thousand million. The character of the crisis
measured in all its depth (index of economic activity and employment,
deterioration of private and public company patrimony, credit, world trade, and
peoples’, family and company expectations), graveness (contemplating its
duration, temporality and its return to a normal state) and reach (world,
regional or local) surpasses the initial previsions of 2007 and 2008.

In the US alone, the amount of production
below full potential is estimated, in academic circles, to be $2.9 trillion* and
unemployment will reach 10% by the end of the year.

We hold the position that we are marching towards another capitalist
depression, deeper than that of the 1930s in the 20th century. That is why we
have to be prepared to defend the libertarian and just project involved in the
socialist proposal for Venezuela, living together with a world crisis with its epicentre in 2009, and which
will extend to 2011 and have a period of minimum recuperation of 10 years.

All of this in combination with high grades of dependency that we
continue to have on cash flows originating from oil industry activity, which has
converted itself into one of the transmission belts of the crisis. The
revolutionary government and the organised people can confront the world
capitalist crisis, placing the maximum level of social awareness, in order to
be able to come out of this historic episode of ruinous capitalism.

IV.
Preliminary conclusions

First. The world crisis that is making capitalism tremble
originated in a crack in the accumulation of capital in a sector of financial
capitalism.

It is the contradictions of capitalism
that explain the crisis, particularly those that place emphasis on accumulation
and reproduction of the system in the sphere of easy and quick profits, in the
finance sector. We are identifying a historic bankruptcy of investment banking
sector that unashamedly
speculated for decades.

Second. We are heading in an accelerated manner towards a grave, deep economic
depression, with worldwide reach. The fall of credit drags with it consumption
and investment. The conventional anti-cycle mechanisms or instruments of
economic policy have become impressively exhausted. We should prepare ourselves
for a minimum of three years of fall of production and employment.

Third. Long-term crisis of neoliberal economic thought. The fundamentalism of
the “free market” has failed. There is a resurgence of Keynesian schemas
(fiscal policy converts itself in the principal tool for anti-cyclical
policies). A relevant role for the state in economic material.

Fourth. Loss of US influence in the world economy. The discrediting of the IMF
and World Bank. The crisis must serve to attempt to lay the foundations of a
new international financial economic order. We need to back the dissident
efforts of the BRIC group (Brazil, Russia, India and China) within the G20,
that is demanding changes to the IMF and World Bank, as well as the possibility
of creating “a supranational currency reserve” and the obligatory
diversification of the structure of currency reserves and operations of
national banks and international financial organisations.

Fifth.
The revolutionary government
and the organised people of Venezuela will confront the backlash of the world
crisis remaining loyal to the programs of equality (social spending) and
attempting to preserve investment in order to sustain growth and employment in
the current conjuncture and, in the medium and long term, to the strategic,
sustaining the project of a socialist society that will allow us a superior arena
to be able to live in freedom and with justice, based on equality and
solidarity of the human species.

[* Translator's note: The original document referred to these figures as billions, using the formula of 1 billion = 1 million million more common in Spanish, rather than the increasingly standard English-language formula of 1 billion = 1 thousand million. It has been changed here to trillion to match the latter usage.]